Decoding overtime pay

Bill Vogel, PHR
Post Date: 7/21/2018
VirtualHRPros.com
 
Calculating overtime for hourly (nonexempt) paid employees seems straight forward. If an hourly employee works more than 40-hours in a workweek, employers must pay the employee at a rate that is time and one half their regular rate of pay. Unless you’re a California employer, where employers must pay overtime for all time worked over 8-hours in a day. The federal Wage and Hour Division provides guidance to employers for calculating overtime on their website. Whichever state you are in, calculating overtime can get complicated.  Here are some steps you can take towards decoding and then properly calculating overtime pay: 
 

• Capture work time accurately
  
• Calculate overtime on actual work hours
• Seventh day premium Pay

 
First, every minute worked should be counted when calculating wages earned by an employee. Employers and employee should avoid rounding as this can create some legal struggles. Rounding can become a concern when employees are completing a time card by hand or entering start and stop times electronically. The best method for accurately capturing time worked is by having employees punch a clock. Today’s technology provides inexpensive and accurate methods for clocking in and out for both onsite and field employee.
 
Second, overtime is calculated using actual time worked. A common mistake is adding paid vacation or paid sick time to the overtime calculation. Employees may also attempt to argue that overtime was missing from their paycheck after a workweek that included a paid holiday. Vacation, sick time, and holiday pay is not time the employee worked, but a benefit which is not used to calculate overtime.
 
Third, a seventh consecutive day worked will require all hours paid at time and one half for the first 8-hours worked and double time for all hours worked after 8-hours.  California employers need to keep in mind that recent court cases ruled that employees are guaranteed a day of rest each work week. This means employees must agree, and not be made to forgo, a seventh day of rest within the employer’s defined workweek. Therefore, if an employee refuses to work a seventh day in a work week, they are no exempt from disciplinary action.
 
Finally, here’s a short example; Bill is employed in the state of Nevada. Bill worked Monday through Wednesday for eight hours each day. Bill did not work on Thursday, which is a paid holiday provided as a benefit by the employer’s compensation policy. On Friday, Bill works ten hours, but does not work on Saturday and Sunday. Bill’s rate of pay is twenty dollars per hour and his employer defines the work week as Monday through Sunday.  How much did Bill earn before deductions (gross pay)? The answer is $840 (42 hours x $20) for the week.  If Bill worked in California, his gross pay is $880 for the week (42 hours x 20 + $10 x 2 hours of overtime). 
 
As always, get help from a qualified HR Professional if you think your business is at risk, or needs help developing policies, procedures, and training courses for help with workplace improvement and compliance requirements.

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